Lenovo vows to revamp supply chains to revive smartphone segment

Smartphone maker Lenovo plans to draw its successful experience in its computer segment to boost handset sales.
Written by Cyrus Lee, Contributor

In the face of a deteriorating smartphone business, Lenovo has ambitiously announced a reviving plan to revamp its current manufacturing supply chains and beef up investment in its global campaign, the company's two executives in charge of operating and marketing said in a South China Morning Post report this week.

A recipe for the world's largest supplier of personal computers is its efficient supply chain, and a full revamp of its smartphone supply chains will also allow the company to gain a big advantage in competition with other peers in the market, according to Lenovo chief operating officer Gianfranco Lanci.

"We're working to leverage our personal-computer supply chain know-how for the smartphone business," Lanci said in the report. Lenovo's full integration of the supply chain for its personal computers and enterprise servers has effectively cut the cost of components and production cycle times, as the assembly of its computers is able to be carried out in the same Chinese factory.

But the revamp of Lenovo's smartphone supply chain needs be completed within 2016, in a bid to effectively "manage inventory and parts supplies, as well as provide flexibility in the factory", Lanci said.

Lenovo will also lift its expenditure in advertising and marketing in the current fiscal year, according to its chief marketing officer David Roman, who didn't provide a number in the report.

Lenovo determined to reform its smartphone segment as the Chinese technology giant has been facing escalating competition from other Chinese brands such as Huawei and OPPO.

The leading computer supplier has already been edged out the top five brands in terms of smartphone sales in China. An earlier report indicated that Lenovo shipped a total of 10.8 million smartphones in the first quarter this year, down 42 percent from the same period last year and 46 percent less over the previous quarter, far below an estimation of 15 to 18 million by Wall Street. Morgan Stanley also lowered Lenovo's rating to sell from neutral in May, according to the report.

Nevertheless, Lenovo's confidence and determination in its smartphone business has never been sapped, Lenovo CEO Yang Yuanqing said in a news report in June. Since the first quarter this year, Lenovo has decided to halt providing low-end products to the telecom operators, and shift its product lines from the low-end to mid- and high-end ones, according to the report.

In January, the CEO said at CES 2016 that he anticipates a refresh cycle in the PC industry, which is still "very attractive".

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